About Those Catalog Values...
by Peter Torraca
Catalogs are indispensable tools for advanced collectors and beginners alike. Condensed in a good catalog is literally decades of philatelic data, research, and experience. Yet most people turn to stamp catalogs for their market information: many people use a catalog to value their stamps. For the inexperienced, there some danger in assigning a value to a stamp based on a catalog listing.
Every now and again someone comes into our offices with dollar signs in their eyes clutching a collection tight to their chest in hopes we will purchase it for at least full catalog value. While we are happy to pay competitive prices for quality stamps, we usually have the unpleasant job of explaining to them why we can't pay the values listed in the catalog. Usually it is best to begin by defining a few terms.
In any sales business, there are at least two different values for a single item. A wholesale value is the price of an item when it is purchased from a supplier by a retailer. A retail value is the price of that same item when it is sold to an end consumer. For example, a dozen eggs may cost your local supermarket $1.00 per dozen to buy from an egg dealer. The supermarket, of course, charges you $1.50 - $2.00 (or more) per dozen for those same eggs. This final price is the retail value. Stamp catalogs list the retail value of a stamp at the time when the catalog is published. In other words, the catalog value of a stamp is the price you should expect to pay for that stamp if you were to purchase it from a dealer at full retail value.
Within the stamp trade, there is a thriving wholesale business. Dealers regularly purchase from other dealers stamps that are needed to fill orders. The prices paid for stamps between dealers varies widely based on the relationship of the dealers, the stamp itself, a the current market conditions. It is these wholesale trades that really set the pace for the stamp market. Whenever a knowledgeable, honest dealer buys a collection from the public, he or she is likely thinking about the minimum they can resell that collection for to another dealer. Of course, the buyer hopes to sell the collection in a retail deal where they can earn a little more profit, but that is not always possible so the wholesale value acts as a touchstone.
It is at this point that the inexperienced get tripped up. Because of these fluctuations on the inside of the stamp market, it is almost impossible to set a general rule about the wholesale value of a stamp based on a catalog value. For example, take the fictional country of Stazobia. If collectors are eagerly seeking stamps from Stazobia then dealers will be, in turn, trying to obtain as many stamps to offer as possible and thus may be paying a premium for certain Stazobian stamps. It is not uncommon in a booming market that the value, both retail and wholesale, of stamps in demand rises above the catalog value. (Incidently, in this kind of market, we see collectors getting upset because they have to pay more than catalog value for their stamps.)
Of course, the opposite situation is also a possibility: stamps of Stazobia fall out of favor with collectors. For whatever reason, collectors stop buying Stazobian stamps, thus wholesale and retail prices fall. Often the catalogs are slow to catch up: even in current catalogs, the stated values can be high or low by 50% or more.
Now, with all of that in mind, there is a way that catalog values can be helpful to you. If you treat the catalog values as an approximate ratio, you will be able to determine the relative value of your stamps. For example, in the Scott stamp catalogs, the minimum value for a stamp is $0.20 (the introduction of the catalog explains this phenomena). As discussed above, this is not the actual cash value of the stamp, but you can assume that the stamp is of minimal or no value if it is tagged with the minimum catalog value. Likewise, if a stamp in the Scott catalog has a value of $1, you can assume that it is around 7x more valuable than the minimum. A stamp with a catalog value of $10 is, again, 10x more valuable than the $1 stamp. This information is of little help in knowing the exact value of the stamps, but it is a great help in knowing which stamps you should protect more carefully, or which stamps the dealer might be most interested in.
When a stamp catalog gives a value for a stamp, that catalog is making a few assumptions about the stamp. These assumptions are usually summarized in the introductory pages of the catalog. In the Scott stamp catalog, the assumption is that, unless otherwise noted, the values given are for sound stamps with Very Fine centering.
Here is where experience is a must. "Very Fine" (or VF) is a collector's term for a specific centering grade on a stamp. New collectors often struggle with calling centering grades, but getting the grade right is very important to the value of a stamp, both in buying and selling. Many catalogs have a small primer on how to grade stamps, but in grading centering, there is no substitute for seeing a lot of different stamps. A stamp which does not meet the centering condition of a catalog, cannot be assigned the full catalog value. In both buying and selling, discounts are applied for stamps with less than VF centering.
"Sound" is another collector's term which describes a stamp completely without faults. Faults can be anything from missing perforations, creases, tears, repairs, pulled perforations, thin spots, stains, or scruffs. If a stamp has any of these problems, a discount is immediately applied. Determining a sound stamp is mainly a matter of careful observation. However, certain repaired stamps can appear sound to the inexperienced. If a stamp is determined to be repaired in some way, its value is greatly reduced.
The condition of a stamp can also raise its value significantly. A stamp which exceeds the given catalog condition, that is, a stamp which is sound but has better centering than VF, can very well retail full catalog value or more. For stamps like this, value is largely a matter of the stamp market and how many really well centered stamps exist. Generally speaking, early US stamps with excellent centering and no faults fetch a premium on both the wholesale and retail market. Modern US stamps are typically always well centered and thus do not fetch any premium for excellent centering.
So what are you to do if you are unable, or unwilling, to spend years figuring out the specific dynamics of the stamp market? The best thing to do is to find a stamp dealer who is reputable, honest, and you are comfortable working with. That person will take the time to speak with you openly and frankly about your holdings and the current market. It is very important that you are able to trust whoever you are working with. Unless you are fortunate enough to live next to a reputable dealer, you will likely have to ship your holdings for evaluation and an offer. Ask for some information about the company or individual offering to buy your stamps: Have they been in the business long? Are they associated with any professional stamp organizations? What is their area of specialty? What happens if you decline their offer or they choose not to purchase your stamps?